As you may recall from our previous articles (here and here), newly enacted laws, at both the federal level and in New York State, require certain entities to file beneficial ownership information reports to prevent against money laundering, financing of terrorism, and other illicit and fraudulent activities. These laws are the Corporate Transparency Act (effective 1/1/24) and the NYS LLC Transparency Act (effective 1/1/25).
We have provided you with some preliminary information and helpful links below, with a focus on the Corporate Transparency Act, as that law's required reporting is already in effect. Please refer to the helpful FAQs here and the Small Entity Compliance Guide here. This information is meant to be general-only and should not be applied to your specific facts and circumstances without consultation with competent legal counsel.
While reviewing the below, keep in mind that it is based on current guidance and subject to change based on updated legislation or new guidance. On March 1st a U.S. District Court in Alabama found the Corporate Transparency Act to be unconstitutional (read the decision here). That decision, while a victory for those advocating against the requirements of the CTA, should be considered with caution at this point as additional litigation will be coming as that case continues to work its way through the courts. Reliance on this district court’s opinion to support not filing beneficial ownership reports would be unwise at this time – regardless of if your entity is in that specific district or not. The implications of this decision on companies not party to this specific litigation are unclear, and those entities advised by legal counsel to file should certainly continue to do so. It’s entirely possible that this decision may be overruled and therefore the penalties for noncompliance would still be a concern.
Who:
- Corporations, LLCs, or any similar entities created by the filing of a document with a secretary of state or any similar office
- There are 23 types of organization that are exempt from the reporting requirements
What:
- Information (name, date of birth, address, ID number and image) on
- "Beneficial owners” - anyone who directly or indirectly, exercises “substantial control” over a reporting company (including senior officers, important decision makers, or those with certain controlling authorities), or owns or controls at least 25% of the ownership interests of a reporting company (equity, stock, voting rights, profit interests, options, or privileges)
- "Company applicants” for new entities created on or after 1/1/24 - anyone involved in the creation and registration of the company, including “direct filers” and “individuals who direct or control filing actions”
Where:
- Through FinCEN’s e-filing system, the online portal for the electronic filing of the Beneficial Ownership Information Report (BOIR) under the Corporate Transparency Act
When:
- By 1/1/25 for existing entities
- Within 90 days* of creation for new entities created on or after 1/1/24 (*note in future years this will be within 30 days)
- Updated reports are due within 30 days if there is a change to any previously reported information about the company or its beneficial owners
Why:
- Prevention against money laundering, financing of terrorism, and other illicit and fraudulent activities
- There are steep civil and criminal penalties, including $550/day or up to two years of prison time for willfully failing to file, so it is important to speak with an attorney and determine your requirements – if any
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.